1

LSM733-PRODUCTION OPERATIONS MANAGEMENT

By: OSMAN BIN SAIF

LECTURE 24

2

Summary of last Session

Lot-Sizing Techniques Extensions of MRP

Material Requirements Planning II (MRP II)Closed-Loop MRPCapacity Planning

MRP In ServicesDistribution Resource Planning (DRP)

3

Summary of last Session (Contd.)

Enterprise Resource Planning (ERP)Advantages and Disadvantages of ERP

SystemsERP in the Service Sector

4

Agenda for this Session

Chapter: JIT and Lean Operations Global Company Profile:

Toyota Motor Corporation Just-in-Time, the Toyota Production

System, and Lean Operations Eliminate Waste Remove Variability Improve Throughput

5

Agenda for this Session (Contd.)

Just-in-Time JIT Partnerships Concerns of Suppliers

JIT Layout Distance Reduction Increased Flexibility Impact on Employees Reduced Space and Inventory

6

Agenda for this Session (Contd.)

JIT Inventory Reduce Variability Reduce Inventory Reduce Lot Sizes Reduce Setup Costs

JIT Scheduling Level Schedules

7

CHAPTER : JIT, Lean Operations

8

Toyota Motor Corporation Largest vehicle manufacturer in the world with annual sales of over

9 million vehicles Success due to two techniques, JIT and TPS Continual problem solving is central to JIT Eliminating excess inventory makes problems immediately evident

9

Toyota Motor Corporation Central to TPS is a continuing effort to produce products under ideal

conditions Respect for people is fundamental Small building but high levels of production Subassemblies are transferred to the assembly line on a JIT basis High quality and low assembly time per vehicle

10

Just-In-Time, TPS, and Lean Operations

JIT is a philosophy of continuous and forced problem solving via a focus on throughput and reduced inventory

TPS emphasizes continuous improvement, respect for people, and standard work practices

Lean production supplies the customer with their exact wants when the customer wants it without waste

11

Just-In-Time, TPS, and Lean Operations

JIT emphasizes forced problem solving TPS emphasizes employee learning and

empowerment in an assembly-line environment

Lean operations emphasize understanding the customer

12

Eliminate Waste

Waste is anything that does not add value from the customer point of view

Storage, inspection, delay, waiting in queues, and defective products do not add value and are 100% waste

13

Ohno’s Seven Wastes

Overproduction Queues Transportation Inventory Motion Overprocessing Defective products

14

Eliminate Waste

Other resources such as energy, water, and air are often wasted

Efficient, ethical, and socially responsible production minimizes inputs, reduces waste

Traditional “housekeeping” has been expanded to the 5 Ss

15

The 5 Ss Sort/segregate – when in doubt, throw it

out Simplify/straighten – methods analysis

tools Shine/sweep – clean daily Standardize – remove variations from

processes Sustain/self-discipline – review work and

recognize progress

16

The 5 Ss Sort/segregate – when in doubt, throw it

out Simplify/straighten – methods analysis

tools Shine/sweep – clean daily Standardize – remove variations from

processes Sustain/self-discipline – review work and

recognize progress

Two additional Ss Safety – build in good practices Support/maintenance – reduce

variability and unplanned downtime

17

Remove Variability

JIT systems require managers to reduce variability caused by both internal and external factors

Variability is any deviation from the optimum process

Inventory hides variability Less variability results in less waste

18

Sources of Variability

1. Incomplete or inaccurate drawings or specifications

2. Poor production processes resulting in incorrect quantities, late, or non-conforming units

3. Unknown customer demands

19

Sources of Variability

1. Incomplete or inaccurate drawings or specifications

2. Poor production processes resulting in incorrect quantities, late, or non-conforming units

3. Unknown customer demandsBoth JIT and inventory reduction are effective tools

in identifying causes of variability

20

Improve Throughput

The time it takes to move an order from receipt to delivery

The time between the arrival of raw materials and the shipping of the finished order is called manufacturing cycle time

A pull system increases throughput

21

Improve Throughput

By pulling material in small lots, inventory cushions are removed, exposing problems and emphasizing continual improvement

Manufacturing cycle time is reduced Push systems dump orders on the

downstream stations regardless of the need

22

Just-In-Time (JIT)

• Powerful strategy for improving operations• Materials arrive where they

are needed when they are needed

• Identifying problems and driving out waste reduces costs and variability and improves throughput

• Requires a meaningful buyer-supplier relationship

23

JIT and Competitive Advantage

Figure 16.1

24

JIT and Competitive Advantage

Figure 16.1

25

JIT Partnerships

JIT partnerships exist when a supplier and purchaser work together to remove waste and drive down costs

Four goals of JIT partnerships are: Removal of unnecessary activities Removal of in-plant inventory Removal of in-transit inventory Improved quality and reliability

26

JIT Partnerships

Figure 16.2

27

Concerns of Suppliers Diversification – ties to only one customer increases risk Scheduling – don’t believe customers can create a smooth schedule Changes – short lead times mean engineering or specification changes can

create problems Quality – limited by capital budgets, processes, or technology Lot sizes – small lot sizes may transfer costs to suppliers

28

JIT Layout

Table 16.1

Reduce waste due to movement

JIT Layout TacticsBuild work cells for families of productsInclude a large number operations in a small areaMinimize distanceDesign little space for inventoryImprove employee communicationUse poka-yoke devicesBuild flexible or movable equipmentCross-train workers to add flexibility

29

Distance Reduction

Large lots and long production lines with single-purpose machinery are being replaced by smaller flexible cells

Often U-shaped for shorter paths and improved communication

Often using group technology concepts

30

Increased Flexibility

Cells designed to be rearranged as volume or designs change

Applicable in office environments as well as production settings

Facilitates both product and process improvement

31

Impact on Employees

Employees are cross trained for flexibility and efficiency

Improved communications facilitate the passing on of important information about the process

With little or no inventory buffer, getting it right the first time is critical

32

Reduced Space and Inventory

With reduced space, inventory must be in very small lots

Units are always moving because there is no storage

33

Inventory

Inventory is at the minimum level necessary to keep operations running

JIT Inventory TacticsUse a pull system to move inventoryReduce lot sizesDevelop just-in-time delivery systems with suppliersDeliver directly to point of usePerform to scheduleReduce setup timeUse group technology

Table 16.2

34

Reduce Variability

Inventory level

Process downtimeScrap

Setup time

Late deliveries

Quality problems

Figure 16.3

35

Inventory level

Reduce Variability

Scrap

Setup time

Late deliveries

Quality problems

Process downtime

Figure 16.3

36

Reduce Lot Sizes

Figure 16.4

200 –

100 –

Inve

ntor

y

Time

Q2 When average order size = 100average inventory is 50

Q1 When average order size = 200average inventory is 100

37

Reduce Lot Sizes Ideal situation is to have lot sizes of one

pulled from one process to the next Often not feasible Can use EOQ analysis to calculate

desired setup time Two key changes necessary

Improve material handling Reduce setup time

38

Lot Size ExampleD = Annual demand = 400,000 unitsd = Daily demand = 400,000/250 = 1,600 per dayp = Daily production rate = 4,000 unitsQ = EOQ desired = 400H = Holding cost = $20 per unitS = Setup cost (to be determined)

Q = 2DSH(1 - d/p)

Q2 = 2DSH(1 - d/p)

S = = = $2.40(Q2)(H)(1 - d/p)

2D(3,200,000)(0.6)

800,000

Setup time = $2.40/($30/hour) = 0.08 hr = 4.8 minutes

39

Reduce Setup Costs

High setup costs encourage large lot sizes Reducing setup costs reduces lot size and

reduces average inventory Setup time can be reduced through

preparation prior to shutdown and changeover

40

Lower Setup Costs

Figure 16.5

Sum of ordering and holding costs

Holding cost

Setup cost curves (S1, S2)T1

S1

T2

S2

Cost

Lot size

41

Reduce Setup Times

Figure 16.6

Use one-touch system to eliminate adjustments (save 10 minutes)Step 4

Step 5Training operators and standardizing work procedures (save 2 minutes)

Initial Setup Time

Step 2Move material closer and

improve material handling (save 20 minutes)

Step 1

Separate setup into preparation and actual setup, doing as much as possible while the machine/process is

operating (save 30 minutes)

Step 3Standardize and

improve tooling (save 15 minutes)

90 min —

60 min —

45 min —

25 min —

15 min —13 min —

—Repeat cycle until subminute setup is achievedStep 6

42

JIT Scheduling

Schedules must be communicated inside and outside the organization

Level schedules Process frequent small batches Freezing the schedule helps stability

Kanban Signals used in a pull system

43

Table 16.3

Better scheduling improves performance

JIT Scheduling TacticsCommunicate schedules to suppliersMake level schedulesFreeze part of the schedulePerform to scheduleSeek one-piece-make and one-piece moveEliminate wasteProduce in small lotsUse kanbansMake each operation produce a perfect part

JIT Scheduling

44

Level Schedules

Process frequent small batches rather than a few large batches

Make and move small lots so the level schedule is economical

“Jelly bean” scheduling Freezing the schedule closest to the due

dates can improve performance

45

Scheduling Small Lots

A B CA AAB B B B B C

JIT Level Material-Use Approach

A CA AA B B B B B C CB B B BA A

Large-Lot Approach

TimeFigure 16.7

46

Summary of the Session

Chapter: JIT and Lean Operations Global Company Profile:

Toyota Motor Corporation Just-in-Time, the Toyota Production

System, and Lean Operations Eliminate Waste Remove Variability Improve Throughput

47

Summary of the Session (Contd.)

Just-in-Time JIT Partnerships Concerns of Suppliers

JIT Layout Distance Reduction Increased Flexibility Impact on Employees Reduced Space and Inventory

48

Summary of the Session (Contd.)

JIT Inventory Reduce Variability Reduce Inventory Reduce Lot Sizes Reduce Setup Costs

JIT Scheduling Level Schedules

49

THANK YOU